Seeking Alpha: Silver Wheaton Still Looks Like A Quality Option

Investors have plenty of options for investing in silver, including silver miners like Fortuna Silver Mines (NYSE:FSM), Pan American Silver (NASDAQ:PAAS), and Coeur Mining (NYSE:CDE), bullion ETFs (as well as mining ETFs), physical bullion, numismatic silver, and so on. Amidst those options, I think streaming specialist Silver Wheaton (NYSE:SLW) remains a strong candidate, given its low fixed cost structure, attractive balance sheet/liquidity, and disciplined approach. Although weaker silver prices and producer missteps are both threats, weaker prices would at least potentially create more streaming opportunities to generate long-term value.

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Silver Wheaton Still Looks Like A Quality Option

Seeking Alpha: Quality Doesn't Come Dirt-Cheap With Franco-Nevada

I'm not a gold bug by any stretch, but I do like the basic business model pursued by precious metal royalty companies like Franco-Nevada (FNV), Royal Gold (RGLD), and Silver Wheaton (SLW). By providing financing to mining companies and getting a low-cost cut of their metal production in exchange, these companies offer leverage to precious metal prices and better diversification of operating risks. They're also something of a "heads I win, tails I don't really lose" proposition, as periods of weaker metal prices limit miners' financing options and allow royalty companies to set up new agreements on better terms.

The long and short of it is that I believe Franco-Nevada offers a pretty efficient way to gain exposure to precious metals. The company has generally outperformed gold in good times and bad and also offers a dividend stream - addressing one of the major complaints with precious metal investments. These shares are not exactly cheap at around 1.9x NAV, but that's a little below the middle of the historical range for a company with a good operating history and solid production growth prospects in the future.

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Quality Doesn't Come Dirt-Cheap With Franco-Nevada

Seeking Alpha: Weak Prices, Operational Uncertainties Pressuring Royal Gold

As a primarily precious metals royalty company, Royal Gold (RGLD) would have more than enough trouble just from the freefall in gold prices over the last fifteen months. Making matters worse, a significant percentage of Royal Gold's value and future revenue streams are tied to projects like Thompson Creek's (TC) Mt. Milligan and Barrick Gold's (ABX) Pascua-Lama that are facing some real stress and uncertainty.

With that, Royal Gold is another precious metals stock that is trading well below past valuation norms, currently trading around $45 per share. There is definitely potential downside in these shares, as my estimates of NAV would slide below $40/share at $1,000 gold and below $30 at gold prices of $750/ounce. I'm well aware that metal prices frequently overshoot on both the high and low points of the curve, but the global cost curve of gold production would suggest that a large percentage of supply would disappear below $1,000 and that should be supportive of long-term prices. Although I don't disagree that the challenges at Thompson Creek and Barrick do merit some discount to past multiples (likewise for the current price of gold), I'm starting to think the re-rating on these shares might have gone far enough.

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Weak Prices, Operational Uncertainties Pressuring Royal Gold

Seeking Alpha: Thompson Creek Walking A Very Fine Line

While a lot of investors seem to love David-versus-Goliath underdog stories, I think they too often forget a key detail - what makes that story so special is how unlikely the outcome was; normally David gets absolutely pasted and ends up either with a bunch of tubes coming out of him or in a box. In the case of a stock like Thompson Creek (TC), then, I think investors are often too willing to look past the serious operational and macro risks that go capacity expansion stories at small miners.

That grim opening probably suggests that I'm bearish on Thompson Creek Metals. In point of fact, I'm not. I think Thompson Creek is a very interesting speculation at this point. But I do believe it's important for investors considering these shares to appreciate that there are sizable risks here and a happy ending is far from guaranteed.

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Thompson Creek Walking A Very Fine Line

Investopedia: 2011 - A Look Back At Gold Stocks

This past year was a curious one for the gold sector. While a lot of attention seemed to go toward the daily ups and downs of gold prices, the incessant wrangling over debt and budgets in much of the developed world, and the ongoing sovereign debt crisis in Europe, there were some interesting developments below the surface. Although the price of gold and the performance of gold miner stocks have never been in one-to-one lockstep, perhaps 2011 marks the beginning of an even greater independence in these trading patterns. (For more, see 5 Best Bets For Buying Gold.)

For Gold Itself, Not a Bad Year  
At the most basic level, gold had another strong year. While the year is not yet complete and the final tallies of the major market indexes are not yet written, it is all but inconceivable that 2011 will close without a fairly sizable performance gap in the favor of gold. As of this writing, the S&P 500 is basically flat for the year, while the SPDR Gold Shares (ARCA:GLD) is up better than 20%.

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